Flood Re – Latest News And Developments

An agreement was set out between government and the Association of British Insurers called the ‘Statement of Principles’ to guarantee all properties were offered insurance against flooding, even those deemed to be at high risk. This expired in 2013, and ever since, negotiations have been underway to come to a new permanent solution.

There has been a temporary ‘Memorandum of Understanding’ in place in the interim, but this has to be replaced by a definitive solution that will be titled ‘Flood Re’.

Flood Re is intended to make affordable insurance available to owners of property identified as flood-prone by the Environment Agency. It involves an industry-backed levy to support insurers in covering those most at risk from flooding. All UK insurers will pay into this pool to create a fund which will then be used to pay flood-related claims in high-risk areas.

Unless a new agreement is reached, insurers will no longer guarantee to offer flood cover. This could mean that upward of 200,000 properties will be uninsurable for flood.

So what next for Flood Re? And how will it affect you?

If you would like to keep abreast of Flood Re news and developments, and what they really mean to home and business owners, this page will be regularly updated with blogs about progress…

It’s hard to believe that Flood Re has been in operation for over a year, and it has just issued its first Annual Report. This government-backed scheme, which we’ve written about many times, was launched in 2016 after years of wrangling and is designed to provide affordable flood insurance for properties in high-risk areas.

According to the Annual Report, just over 1.25 million policies have been backed by Flood Re in this first year. It’s really good to hear that four out of five householders with previous flood claims have seen a reduction of over 50 per cent in the price of available quotes for their flood insurance.

Apparently it has also led to far more choice for those in high-risk areas. Before the scheme was launched, only nine per cent of householders who had previously made flood claims could get quotes from two or more insurers, with none able to get quotes from five or more. Now, 95 per cent have received two or more quotes, and 84 per cent five or more. So it seems the scheme is working.

However, there has been some criticism in the press. Over the last year, we haven’t had flooding on the scale seen in the years leading up to the scheme’s launch and only £100,000 in claims associated with Flood Re has been paid out. However the company administering the scheme has been paid £500,000. Seems like they’ve got a good deal.

The biggest test of the scheme will come if and when the next major flooding occurs. Fingers crossed that this doesn’t happen for a very long time. But it’s fantastic that people in high-risk areas can now sleep more easily as they know they have affordable flood insurance in place.

At last: after years of being left out of plans for flood insurance, there’s firm news for businesses at risk of flooding. The British Insurance Brokers Association (BIBA) has this week launched an affordable flood insurance scheme for businesses.

One of the key gripes about Flood Re, which was launched earlier in the year, was that it only offered affordable flood insurance for residential properties. This was put into particular focus by the winter floods of 2015 and 2016, when so many businesses were hit.

This added to the momentum for something to be introduced which would extend the reach of Flood Re (we wrote about this a couple of months ago). So now BIBA should be congratulated for sticking to its promises and finding a solution. And this doesn’t just apply to businesses: it will also offer flood cover for rented properties.

One interesting aspect of the new scheme is that it is going to give customers some choice in the level of excess which would be applied in the event of a claim. This will reflect their specific location and how much risk they want to bear themselves: it’s not ‘one size fits all’.

So, as we approach the end of 2016, it seems that affordable flood cover for anyone at risk is finally here. But even though this is a happy note on which to finish the year, let’s hope the new schemes aren’t tested through a repeat of last year’s Christmas and New Year floods.

Firstly, the new scheme for affordable flood insurance, Flood Re, has now been in operation for six months and apparently 53,000 properties have been protected through it, which is great. And having started with 16 insurers, there are now 41 providing cover to high-risk properties under the scheme. But there’s still a long way to go, with an estimated 350,000 homes which could benefit from more affordable flood insurance.

One problem with extending Flood Re’s reach, according to its Chief Executive, is that the government and insurers still use language which is difficult to understand, leaving consumers confused about risks and what is available. He’s advised them to check the Flood Re website to see which insurance providers are now participating and to find out more. And the Association of British Insurers has advised people to shop around to see how this more competitive market can help them.

Meanwhile, there’s plenty of discussion about flood defences. According to the Daily Mail, the system for allocating funds to defence schemes is skewed towards the south east because it is tied to the value of property.

Apparently flood protection projects need to demonstrate that they deliver more in benefits than they cost, based on calculating the economic losses avoided through protecting property and infrastructure. So this would make flood defence schemes in the south east look more economically attractive as property prices are higher. There are measures in place to avoid favouring wealthier areas, but many claim that the funding formula is not fit for purpose.

And finally, there was a recent news item in the Yorkshire Post which is rather surprising. Apparently at least 1,200 homes have been built in the last five years in areas at high-risk of flooding, despite opposition from the Environment Agency. These figures may not be the full story as the Agency isn’t always informed about the outcome of any objections it lodges against development. With the increasing amount of flooding, it seems extraordinary that this is still happening.

One of the biggest criticisms of the new Flood Re scheme, which came into force earlier in the year, is that it doesn’t cover small businesses. We’ve written lots over the last few years about this: Flood Re has been introduced to provide affordable flood insurance for properties in high-risk areas, but it excludes businesses, buy-to-let properties and new builds.

But according to some recent press reports, there may be some good news for small businesses around the corner. As we wrote in May, the industry has been looking at introducing a ‘Flood Re 2’ to cover small businesses, and this is likely to be launched later this month.

The prime mover in this appears to have been the British Insurance Brokers Association (BIBA), working alongside four insurers who are yet to be named. According to the Financial Times, they will analyse the specific risks facing the businesses concerned before underwriting the ‘vast majority’ of policies. The cover is likely to include property damage, business interruption and theft, and policyholders will have the option to pay higher premiums in exchange for lower excesses.

This has to be very good news if it happens. We will keep you posted if and when we find out any more.

It seems that things are on track for what could be called Flood Re 2. According to recent reports, a new scheme to extend Flood Re to cover businesses is likely to be launched in the autumn. It’s not good news for all businesses: it seems that only smaller businesses will be covered, but precise details have not yet been announced.

We reported back in January that this winter’s floods had hit businesses particularly badly, and many weren’t covered by insurance because it was too expensive. While Flood Re, which came into force in April, offers affordable flood insurance for homeowners, businesses aren’t covered. But sustained pressure from interest groups led to a U turn on this and so we now await ‘Flood Re 2’.

But however effective Flood Re 2 turns out to be, it won’t help if businesses haven’t got the correct insurance in the first place. A business insurance expert has recently written about what to consider when buying commercial insurance, which can be summarised as follows:

Think about what you actually need for your business – it’s not a question of one size fits all. For example, many off-the-shelf commercial policies include high levels of travel insurance which is absolutely pointless if you rarely travel long distances.

Don’t necessarily go for the big insurance names. Many smaller insurers offer excellent cover. What’s important is to do your research and compare the policies on offer carefully. If they’re available, read case studies of businesses which have been helped by insurers in the past.

You don’t have to have all your cover with one provider: you could have a mix of different insurers. Match the relevance of different aspects of the cover on offer to your specific business needs.

If you have complicated needs, then it’s probably best to get expert independent advice on which policy is the best for you. Business insurance is far more complex than residential cover and needs to include items such as business interruption. We’ve written a guide to this, which explains what it is and what it should cover. And in the event of needing to make a claim, one of our specialist commercial loss assessors is only a phone call away.